China to bolster economy with $215b sovereign debt issue

The news: China’s top parliament body has approved a sovereign bond issue and allowed local governments to frontload part of their 2024 bond quotas in a move to support the economy.

The numbers: The Standing Committee of the National People's Congress approved additional sovereign debt issuance of 1 trillion yuan ($215 billion), state media reported on Tuesday. That will widen the country's 2023 budget deficit to around 3.8% of gross domestic product from a previously set 3%.

The context: Funds raised from the new sovereign bonds will support the rebuilding of disaster-hit areas in the country and improve urban drainage prevention infrastructure. The world's second-largest economy grew faster than expected in the third quarter, improving the chances that Beijing can meet its growth target of around 5% for 2023. But economists say persistent drag from the property sector still weighs on the economic outlook.

What they said: "The additional fiscal support approved today is the intervention we had been expecting and that was needed to prevent an abrupt fiscal tightening in China in the closing weeks of the year," said Mark Williams, chief Asia economist at Capital Economics told Reuters.